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Consider the balance sheet of Casino Banking Inc. (CBI):
ASSETS
50 Reserves, 50 Treasure Bonds, 250 CDOs, 250 loans
LIABILTIES
300 Deposits, 200 Borrowing, 100 Bank Capital
a. Suppose CBI faces a withdrawal of $50 billion dollars. Show four different ways CBI can deal with this problem.
b. What is the problem in 4a called?
c. Supposed CBI loses $150 billion in CDO investments. What is this problem called? Show this with a balance sheet.
d. How will this problem be resolved?
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